Green's Appeal

Mr. Justice Trunkey delivered the opinion of the court, March 28th 1881. After the completion of the furnaces, Noble filed a claim under the Mechanics’ Lien Law for $51,953.03. The auditor found the balance due him was $34,172.44. His counsel alleges that the auditor erred in stating ’ the sum due less than it should be, and that the true balance is $47,600. This is'less than the amount of bonds Noble received, and the fund for distribution is not sufficient to cover those bonds after deducting liens of sub-contractors. Then if Noble’s lien is not entitled to priority over the mortgage, it is useless to consider the alleged errors by which his claim was reduced. Noble agreed to construct the furnaces for the consideration of $180,000, to be paid by the East Penn Iron Company, $65,000 in its stock, $30,000 in current funds, and “eighty-five thousand dollars of first mortgage bonds of said company, principal and interest guaranteed by the Philadelphia and Reading Railroad Company.” Subsequently, the East Penn Iron Company and the Philadelphia and Reading Railroad Company made an agreement, reciting that the former had made one hundred and fifty coupon bonds for five hundred dollars each, and a first mortgage upon their property therein mentioned, to secure the payment thereof, and the latter guaranteed the payment of said coupons and bonds on certain conditions, among which were that the trustee should hold the bonds clear of any control of the East Penn Iron Company, which should not be entitled to receive them until authorized .by the guarantor upon its becoming satisfied with the progress of the construction of said furnaces. Noble was not a party to the agreement between the companies. His contract contains nothing of conditions of guaranty. Before any bonds were authorized to be delivered to the East Penn Iron Company, a mechanic’s lien was filed, and Noble arranged to pay that lien because of the guarantor’s refusal to deliver the bonds while the same remained unsatisfied. From this he knew that the guarantor insisted upon the mortgage remaining what it purported to be by both agreements. And with this knowledge he received all the guaranteed bonds, which were delivered to the East Penn Iron Company— [347] $48,000 ; nor did lie then assert in any way the right of priority in lien. That Noble could file his claim and hold his lien as against the East Penn Iron Company has not been disputed, but the appellees contend that he is estopped from priority over the mortgage. The appellant denies that Noble either agreed with or represented to any one that the mortgage should have preference to his lien. Conceding, for the present inquiry, that his contract did not preclude the lien, then it dated from the commencement of the work, and was continued by filing the claim within six months after its completion. He bound himself to take less than half the contract price in first mortgage bonds to be guaranteed by a third party. What would the security to the guarantor be worth with a prior lien for the remainder of the price ? Each bond bore on its face the words “ First-Mortgage Bond,” and also the guaranty. Every one that Noble received he sold for just what it purported to be. The guarantor could well infer his agreement to postpone his mechanic’s lien, and the buyer would naturally believe he had done so. If he had a mental reservation to hold his lien against the guarantor and purchasers of the bonds, fortunately the law deals with expressions and acts of parties, rather than their secret intentions. The Act of April 6th 1830 provides that, when the lien of a mortgage upon real estate shall be prior to all other liens upon the same, the lien of such mortgage shall not be destroyed or affected by sale of the real estate by virtue of any writ of venditioni exponas. That any one who contracts for a first mortgage, or who deals in first-mortgage bonds, does not know the phrase means the mortgage described in that statute, is incredible. This mortgage has long been esteemed the safest and most valuable of all real-estate securities for investments. The holder is not compelled to be ever watchful lest a subsequent creditor may sell at judicial sale and buy the property at a price that saves his debt at the loss of prior lien-creditors. In the business of half a century, a first mortgage has come to be very well understood to be one prior to all other liens. That is the kind of mortgage which was guaranteed, and the bonds thereby secured Noble received on his contract. The learned judge of the Common Pleas well said, “ When the parties covenanted for a first mortgage, it implied it first lien as clearly as if words to that effect had been inserted in the agreement itself. In the plain, ordinary and popular sense, first mortgage means first lien. When railroad bonds are sold in the open market as first-mortgage bonds all persons understand them to be first liens. When we speak of lending money on first' mortgage, no thought of anything but a first lien is entertained.” This meaning of first mortgage is so thoroughly grounded as to lead to the sequence that a second mortgage is understood to be [348] one without intervening liens between it and the first: Rice’s Appeal, 29 P. F. Smith 168. There, Ahl had a covenant for certain bonds. The able master said, “ The contract was that he should have $80,000 in second-mortgage bonds, which meant that there was to be no intervening encumbrance, and the confessing of the two judgments and then tendering to him the second-mortgage bonds was not a compliance with, the contract.” Agnew, O. J., characterized the act of placing on the property an intervening encumbrance as a breach of good faith; and Paxson, J., said, “ The bonds offered were not such a security as under his agreement he was entitled to receive.” Appellant’s counsel urge that the endorsement “ First-Mortgage Bonds” is an assertion of the East Penn Iron Company, and not Noble’s. Yet, first of all, Noble covenanted for such bonds. Is it possible that when he sold them he made no assertion ? He sold them as they appeared. At their date Noble’s lien existed, and filing the claim only had the effect to continue it. The bonds gave notice of. the mortgage, and he held out the declaration “ First-Mortgage Bonds.” For such he contracted, as such they were guaranteed, and as such the holders bought them. The court is not simply called on to say whether “mortgage” and “lien” are synonymous. The question is not one of synonyms, nor of technical definitions of words as found in dictionaries. But what does a written contract made in Pennsylvania respecting securities on real estate mean ? When it calls for a first mortgage it means one prior to all other liens. When a party gives such mortgage, or sells a bond secured thereby, showing the facts on its face. <w when he induces its guarantee as such, unless there - be some qualifications expressed, he shall not afterwards set up a lien against the guarantor and holders of the bonds. His plainly-implied contract stands in his way. Green stands in Noble’s shoes. There is not a scintilla of evidence to give him a better position than his assignor would have had no assignment been made. Decree affirmed, and appeal dismissed, at the costs of the appellant.